Chapter 3: 16DQ (page 139)
What is the purpose of the Income Summary account?
Answer:
Main purpose of income summary account is calculating the net income or net loss of the company for a particular period.
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In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.
A. Current assets
B. Long-term investments
C. Plant assets
D. Intangible assets
E. Current liabilities
F. Long-term liabilities
G. Equity
6. Automobiles
What classes of assets and liabilities are shown on a typical classified balance sheet?
Question: What type of assets requires adjusting entries to record depreciation?
Question:Prepare year-end adjusting journal entries for M&R Company as of December 31, 2017, for each of the
following separate cases. (Entries can draw from the following partial chart of accounts: Cash; Accounts
Receivable; Interest Receivable; Equipment; Wages Payable; Salary Payable; Interest Payable; Lawn
Services Payable; Unearned Revenue; Revenue; Interest Revenue; Wages Expense; Salary Expense;
Supplies Expense; Lawn Services Expense; Interest Expense.)
a. M&R Company provided \(2,000 in services to customers that are expected to pay the company sometime
in January following the company’s year-end.
b. Wage expenses of \)1,000 have been incurred but are not paid as of December 31.
c. M&R Company has a \(5,000 bank loan and has incurred (but not recorded) 8% interest expense of
\)400 for the year ended December 31. The company will pay the \(400 interest in cash on January 2
following the company’s year-end.
d. M&R Company hired a firm to provide lawn services at a monthly fee of \)500 with payment occurring
on the 15th of the following month. Payment for December services will occur on January 15
following the company’s year-end.
e. M&R Company has earned \(200 in interest revenue from investments for the year ended December
31. The interest revenue will be received on January 15 following the company’s year-end.
f. Salary expenses of \)900 have been earned by supervisors but not paid as of December 31.
For each of the following separate cases, prepare adjusting entries required of financial statements for
the year ended (date of) December 31, 2017. (Entries can draw from the following partial chart of
accounts:
Cash; Interest Receivable; Supplies; Prepaid Insurance; Equipment; Accumulated
Depreciation—Equipment; Wages Payable; Interest Payable; Unearned Revenue; Interest Revenue;
Wages Expense; Supplies Expense; Insurance Expense; Interest Expense; Depreciation Expense—
Equipment.)
a. Wages of \(8,000 are earned by workers but not paid as of December 31, 2017.
b. Depreciation on the company’s equipment for 2017 is \)18,000.
c. The Office Supplies account had a \(240 debit balance on December 31, 2016. During 2017, \)5,200 of
office supplies are purchased. A physical count of supplies at December 31, 2017, shows \(440 of supplies
available.
d. The Prepaid Insurance account had a \)4,000 balance on December 31, 2016. An analysis of insurance
policies shows that \(1,200 of unexpired insurance benefits remain at December 31, 2017.
e. The company has earned (but not recorded) \)1,050 of interest from investments in CDs for the year
ended December 31, 2017. The interest revenue will be received on January 10, 2018.
f. The company has a bank loan and has incurred (but not recorded) interest expense of $2,500 for the
year ended December 31, 2017. The company must pay the interest on January 2, 2018.
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